By David Ross – The Australian – original article
Pengana Private Credit boss Nehemiah Richardson is confident continued global volatility will drive private credit markets in the years ahead, as the Sydney investment house kicks its investment strategy into gear.
In the past weeks Pengana Private Credit has marked a milestone of fully committing $200m of its seed funding, supplied by pharmacy-turned-fund manager Washington H Soul Pattinson.
Mr Richardson said placing the first $200m required considerable effort finding the right credit partners which could deliver the target returns.
“What we’ve done is open the pipes. We’ve committed capital with fund managers to open up the capacity through which we can deploy investors’ capital.”
Mr Richardson said Pengana Private Credit had placed funds with 15 operators, across four different types of private credit strategies. These run the gamut of direct lending funds to distressed debt credit opportunities.
Mr Richardson, who was brought in to run the private credit investment operation set up by Pengana, said the focus would now be on allocating investments from wholesale and sophisticated investors who had signed on to a wait list in the wake of the formation of the company.
“We’ve got a decent pool of quite a significant amount of opportunities in this space,” he said.
Private credit has boomed as banks pulled back from business lending.
Mr Richardson said Pengana Private Credit was now exploring options for retail investors to access private credit markets.
“The big super funds are large enough to address the structural challenges and the hedging to get access,” he added.
Mr Richardson said private credit options for retail investors may require the company to look at tweaking the underlying exposure to different strategies.
“The question is what’s the return, the risk profile and liquidity profile that you construct products around,” he said.
“It‘s really hard for domestic investors, wholesale or retail, to get access to the global private credit product because of the identification issues and the hedging issues.”
Pengana Private Credit is targeting returns of the RBA cash rate, plus at least 8 per cent.
However, wholesale investors must commit their funds for three years and will receive annual distributions.
Financial giant Mercer is advising Pengana on private credit opportunities.
Mr Richardson said private credit offered an attractive risk-return profile in the higher interest rate period as it could lift returns to match interest rate increases.
He said the year ahead, with looming economic uncertainty and a likely longer period of higher interest rates, presented opportunities.
“Over the past 18 months we’ve had some pretty astounding things happen in markets with rapidly rising interest rates and bank failures,” he said.
“As we’re effectively on the path to removing quantitative easing – with what‘s happening with interest rates and now geopolitically it’s hard to see things will be stable.”
Mr Richardson joined Pengana in June after a career in banking and finance at National Australia Bank and Latitude Financial Services.
Pengana was also able to poach Charles Finkelstein, former treasurer at Citi Australia, who took on the job of chief investment officer.